Once you make the decision to start your own business, there are several steps to take early in the process. These include creating a business plan, figuring out how you will finance the business, and selecting a business name. Another one of the initial steps of starting a business is choosing a business structure.
There are several different business forms -- also called business structures or legal structures -- each with its own advantages and disadvantages. This article provides information to help you choose a business form.
Legal Structures: Overview
Choosing a business structure is very important because it will determine your personal liability as the business owner and tax obligations. There are several types of business structures, the most common being sole proprietorships, general partnerships, corporations, and limited liability companies (LLCs). A sole proprietorship is the most simple business form and enjoys pass-through taxation, but doesn't protect the business owner from personal liability. A general partnership is similar to a sole proprietorship, except that there are two or more owners.
A corporation, on the other hand, is probably the most complex business form but provides the owners with the most protection from liability. Aside from being complex, a corporation is also subject to double taxation. A limited liability company is a more recent development and has some of the best aspects of sole proprietorships and corporations; LLCs provide protection from liability and enjoy pass-through taxation. While LLCs do not require as many formalities as corporations, there are still certain requirements to forming and maintaining LLC status.
Get Legal Help When Choosing a Business Form
If you would like to learn more about different business structures and would like some guidance on which one would be best for your business, you may want to contact an experienced business organizations attorney in your area.
For more information and resources related to this topic, you can visit FindLaw's section on Incorporation and Legal Structures.